JPMorgan says it was defrauded in US$175m college site purchase

Published Thu, Jan 12, 2023 · 04:25 PM

JPMORGAN is claiming that it was defrauded by the founder of Frank, a college financial-planning site it acquired in 2021.

The bank said it “paid US$175 million for what it believed was a business deeply engaged with the college-aged market segment”, with 4.3 million customers. But it said that it instead “received a business with fewer than 300,000 customers”.

JPMorgan alleged that Frank founder Charlie Javice and another executive, Olivier Amar, used fake customer accounts to mislead the bank into completing the deal. It said it uncovered the deceptions in a post-deal investigation.

Javice is also suing JPMorgan for legal fees. Her lawyers argued that the bank rushed to buy Frank without conducting proper due diligence, and was trying to deflect attention from its violations of student-privacy laws.

Alex Spiro, Javice’s attorney, said that JPMorgan “committed misconduct and then tried to re-trade the deal”. He called the bank’s lawsuit “nothing but a cover”.

JPMorgan is the biggest US bank by assets, with a balance sheet of more than US$3.3 trillion. It has been on a startup buying spree since 2020, when its chief executive Jamie Dimon said he wanted to be more aggressive in targeting fintech firms focused on sustainable investing and tax issues. BLOOMBERG